Container lines re-jig India services as volumes plunge

Jogela, a container ship with a capacity to carry 4,957 twenty-foot equivalent units (TEUs) has been anchored off Mumbai since April 15 after it discharged the cargo at one of the terminals of Jawaharlal Nehru Port Trust (JNPT).

After the containers were unloaded, the Madeira, Portugal-registered ship which was chartered by German shipping line Hapag Lloyd A G from Hamburg-based Peter Döhle Schiffahrts-KG, off-hired the vessel for a month, as volumes nose-dived due to the coronavirus-induced demand collapse.

In the normal course, when a ship is de-hired, she will be chartered by someone else who will deploy her on some other route.

“Now, it’s not like that,” said a container shipping industry executive. Hapag Lloyd didn’t feel the need to run the ship for the next one month but didn’t want to let go of the ship either. It wanted to hire the ship again after a month.

“The ship’s owner then decided to drop anchor off Mumbai after it was off hired by Hapag Lloyd. She is waiting outside Mumbai anchorage,” the industry executive said.

Container ship operators such as Maersk Line, CMA-CGM S A and Mediterranean Shipping Co S A (MSC) are looking at ways to cut costs as volumes plunge in what is Asia’s third biggest economy.

Container volumes at JNPT, India’s top container port, fell 37 per cent in April compared to the same month last year. Pan India, container volumes have declined by more than 12 per cent since April year on year, when the new financial year began.

Since March 25, forty-six sailings of scheduled services had to be blanked / cancelled and some of the services had to be rationalized, resulting in huge costs to the lines for the idling of vessels.

Given the grim trade scenario, container carriers have even started resorting to culling one full cycle of a service run with 7-8 ships.

For instance, the Europe-Pakistan-India (EPIC) 1 weekly service run by MSC, Hapag Lloyd and CMA CGM with eight ships, decided recently to suspend one full cycle – all the eight ships will not call at JNPT, Hazira and Mundra. In effect, EPIC 1 will not run the service for eight weeks.

It came hardly a month after the service partners upgraded the service by deploying bigger ships with a capacity to load 13,000 TEUs.

From a logistics point of view, the cost of operating a ship is huge. “Taking that into account, even if they have to forego one sailing, that is much more favourable for an owner/operator,” said the industry executive.

Most of the existing weekly services are calling at Indian ports once in two weeks or even longer. “Weekly sailings have gone now basically because there is no cargo, both ways. This is not a problem specific to India, it’s all over the globe,” said the industry executive.

For example, the EPIC 2 weekly service run by Hapag Lloyd, CMA CGM and COSCO Shipping linking JNPT and Mundra, is calling once in two weeks.

This will ultimately help the carriers at a time when the volumes are down, said an executive with a European container line.

CMA CGM also axed its Middle East-India-East Africa service named MIDAS 2 after some five blank sailings and is using its Middle East-India-West African service called MIDAS 1 that calls at Durban, one common port of call for both the services, to carry Indian cargo.

“That takes care of the entire MIDAS 2 cargo rather than running ships empty on MIDAS 2,” said an industry source.

The April 21 Shipping Ministry order, directing carriers not to levy container detention charges has added to the woes.

“Ports and terminals are giving waiver on ground rent charges. Who is going to pay me for detaining my containers? My container is being used, for which I have incurred a cost, but I’m not supposed to charge anything. From March 1 to May 3, we are not charging a single paise as detention charges,” said the executive with the European line.

“The two months detention is huge. It is the only revenue that we have. We are surviving on that revenue. Freight is virtually zero now. We are shipping cargo even on zero freight. There is a cost for bringing a ship to India. Who will pay for that cost?, he said.

A 9,000 TEU-capacity ship pays about $500,000 to transit the Suez Canal on the way to India from Europe or $1 million for both ways.

The only saving grace is the low bunker prices. To avoid the steep Suez Canal transit fees, some of the carriers plying on the northern Europe-Asia route are diverting their ships via the Cape of Good Hope, entailing extra sailing time of as much as seven days to the voyage.

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